Investors desperately looking for hope in the current choppy market may want to focus on the upcoming midterm elections.
Investors desperately looking for hope in the current choppy market may want to focus on the upcoming midterm elections.
According to an investment outlook report published this week by wealth manager Bessemer Trust Co. NA, “while no indicator can be infallible, midterm congressional elections have historically been accompanied by stock market strength.”
Bessemer discovered that in the quarter after midterm elections, the stock market has an 85% chance of seeing gains. The firm also noted that looking back to 1900, the best combination for the stock market is a Democratic president and Republican Congress, “a possible scenario for this election.”
“To be sure, fundamental factors — from economic growth to corporate earnings — will ultimately drive the stock market going forward. Nevertheless, resolution of upcoming political contests could clear away some degree of uncertainty,” the Bessemer piece noted.
Jeffrey Hirsch, editor-in-chief of the Stock Trader’s Almanac, agrees with Bessemer’s conclusions, noting that “the proven sweet spot of the four-year presidential cycle is the fourth quarter of the second year.”
For example, the Dow Jones Industrial Average since 1949 has risen an average of 7.3% in the fourth quarter after midterm elections, Mr. Hirsch said. That’s double the average for other fourth quarters over that period.
However, Mr. Hirsch also sounded a note of caution. “The only thing that concerns me right now is that everyone is starting to talk about it,” he said. “My contrarian antennae start to purr. It may very well happen, but we should all be careful when we all agree.”
